Financial sustainability and your nonprofit

May 29, 2018

If
your not-for-profit relies heavily on a few funding sources — for example, an
annual government or foundation grant — what happens if you suddenly lose that
support? The risk may be compounded if you generally spend every penny that
comes in the door and fail to build adequate reserves. Bottom line: If your
nonprofit hopes to serve its community many years into the future, you need to
think about financial sustainability now.

Information, please

No organization can accurately evaluate its sustainability
without timely, comprehensive and accurate financial reporting. In addition to
providing a current picture of your standing, financial reports should compare
actual figures with historical and projected numbers. Some nonprofits use
“dashboards” that give real-time financial data, ratios and trends in easily
understood graphic form.

It’s not enough for the board to review financial statements.
Board members must provide true fiscal oversight and not leave major financial
decisions to staff, no matter how trusted and loyal. The finance committee
should report regularly to the full board and engage in dialogue about their
reports and the organization’s financial health. Most importantly, your board
shouldn’t merely take a backward-looking view but should also consider the
future — for example, how current trends and developments might affect future
plans for funding your nonprofit’s mission.

Lower costs, more
revenue

Holding expenses down and continually searching for new
revenue sources are critical to long-term financial sustainability. Many
nonprofits forge formal partnerships with other organizations to share costs.
Look into partnering with organizations that share your missions and serve similar
populations. Such collaboration may enable you to make better use of limited
resources while reducing competition for funding. By joining forces, you can
more quickly scale up high-demand programs or services.

If you’re seeking new revenue ideas, consider expanding
fee-based service offerings to new locations or populations. For example, an
organization that provides services to children with disabilities in schools
also could offer the services to children with disabilities in foster homes.